Is Direct Investment Better for the EB-5 Industry Than the Regional Center Model?

Many EB-5 industry members were understandably concerned when the regional center program, the most popular investment option for the EB-5 visa, was suspended on June 30, 2021. Most investors had chosen regional center-sponsored projects for their more flexible job creation requirements. As a result, some foreign nationals may have been hesitant to subscribe to direct EB-5 projects. However, the past few months have shown that the direct EB-5 investment model can certainly be just as successful as the regional center program. Moreover, it offers several unique benefits for project developers, investors, and the U.S. economy at large.

Direct Projects Have the Greatest Need for EB-5 Capital

Direct EB-5 projects are usually small businesses that need investment funding. Moreover, these businesses can be located in rural or high-unemployment areas that would greatly benefit from economic development. Therefore, direct EB-5 capital can have a significant impact on the U.S. economy. In contrast, many regional center projects are large real estate developments that could likely be completed without EB-5 investment funding.

Direct projects may also be able to access their EB5 investment capital faster. In regional center projects, investors buy equity in an investment fund managed by the regional center; in direct projects, the capital is invested in the new commercial enterprise (NCE) straightaway. The latter arrangement can be more convenient for business owners.

Directly Created Jobs Are More Permanent

Because regional center projects are often real estate developments, the bulk of their job creation may consist of construction positions. However, these jobs end once the project is completed and cannot constitute long-term careers. Direct projects, on the other hand, must create full-time positions that last for at least 24 months; these jobs are more likely to make a long-term difference in reducing unemployment. It is also worth noting that, while regional center projects can count indirectly created jobs using an econometric model, direct projects must list their jobs on the company’s payroll. This transparency contributes to the long-term economic impact of direct EB-5 projects.

Advantages for Investors

The direct EB-5 investment model may appeal to investors who are interested in reaping larger profits in addition to gaining U.S. permanent resident status. Direct investors are usually granted a role in managerial operations and can thus have more control over how their invested capital is used. In addition, due to the smaller size of direct EB-5 offerings, investors may receive higher returns than their regional center counterparts.

Contrary to the expectations of some industry members, the EB-5 program continued to thrive in the second half of 2021 without its regional center component; many new direct investors are beginning the EB-5 visa process, and they may even have their I-526 petitions processed relatively quickly. Foreign nationals interested in the EB-5 visa have an added incentive to invest in a direct project: for the time being, EB-5 investments can be made at the reduced amount of $500,000.

Mentions

• EB5 Affiliate Network State of Florida Regional Center
• EB5 Affiliate Network, LLC
• Sam Silverman

States

• Florida